We were in investing during the tech crash of 1999, in 9/11 and during the 07/08 global financial crisis.
But today’s level of anxiety is of a different magnitude.
As with 9/11 and the financial crisis, I believe that the world will return to a ‘new normal’.
And certain businesses and consumer behaviour will not survive in its current form.
This disease has a limited impact on the vast majority of people, who will experience only mildly debilitating symptoms and will then recover without long-term health consequences.
It is more lethal than seasonal flu, but tough to say how much worse as testing is so patchy.
A fraction without a correct denominator is just a random number.
The World Health Organisation (WHO) shows a consistent pattern of infection tapering two-three months into an outbreak.
Paranoia and panic are sound evolutionary strategies to avoid death in the unfriendly world humanity was born into.
In today’s safe and highly connected world though, they become the driver of the self-fulfilling prophecy.
Pandemic impact
It does not really matter what the course of this pandemic looks like; consumer behaviours (either voluntary or by government edict) has changed and the economic carnage that will follow may prove short lived, but it will feel very real to those who are impacted.
The scale of the economic challenge is significant.
The tourism sector; hotels, bars, restaurants, airlines, cruise lines and the like need to adjust to much lower volumes.
The tourism industry employs around 300 million people globally.
A 10 per cent cut in employment is equivalent to making the entire population of Malaysia unemployed.
These people cannot spend as before and so the economic contagion spreads faster than the virus causing it.
This anxiety and the behaviour changes in response to it mean that a global recession is inevitable.
Resilience
Healthcare stands apart from the wider economy.
If there is a global downturn, it will have little impact on demand for the industry’s products and services.
But let’s see what parts of the industry will be affected, and how.
Heath insurance companies should do well. Why?
Because elective procedures will be postponed and these are costs paid by insurance companies.
The opposite is true for hospitals (facilities).
Profits in hospitals are made in caring for the mildly unwell admitted for elective procedures. These will reduce.
Hospital margins are thin anyway and capex and debt levels are high, so profits will be hit hard.
Pharma, speciality pharma and biotech should be a safe place to hide.
Prescriptions are generally necessary and people are no more likely to forget to take their pills now than before.
